Stocks vs Funds: Six Different Ways They Impact Your Portfolio
What are the key differences between stocks and mutual funds — and which would be better suited to your portfolio? Here are six distinctions you need to know.

Choosing between individual stocks and equity mutual funds depends on your preferences, financial goals and risk appetite.
Including common stocks in retirement portfolios can mitigate the adverse effects of inflation. On the other hand, a mutual fund enables many investors to combine their money with a professional investment manager, buying and owning shares in the fund rather than individual company shares owned by the fund.
A balanced portfolio holding stocks and mutual funds can offer reassurance and confidence in your investment strategy. Here’s what you need to know:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Your level of control
Individual stocks: You select which company shares to buy and sell.
Mutual funds: The investment manager has total discretion.
2. Research and performance
Stocks: You make buy-and-sell decisions based on your own research, knowledge and expertise.
Funds: The fund manager manages the portfolio, researches and monitors performance.
3. Fees and expenses
Stocks: You pay commissions and fees for purchases and sales, though commission-free trades are common. Many brokers charge annual account maintenance fees.
Funds: Most funds have ongoing costs — referred to as “expense ratios” — that cover operating, management, administrative expenses and marketing. Other fees may also be charged.
4. Valuation, marketability and transparency
Stocks: Common shares are priced when the market is open and can be bought or sold during that time. You always know the portfolio composition.
Funds: Mutual fund shares are priced at the end of the day and trade at that closing price. A complete portfolio listing of all stocks is published periodically.
5. Dividends and capital gains
Stocks: You know the amount and timing of dividends received. You also determine the timing of sales that generate capital gains and losses.
Funds: Dividends and capital gains are accumulated in the fund and distributed periodically. Mutual funds can distribute only net capital gains, not losses.
6. Diversification and risk
Stocks: It’s riskier to hold one or two stocks, but you can control the degree of diversification and concentration in any single company, industry or geographic region.
Mutual Funds: With a large basket of stocks, risk is spread around — although most funds have stated investment objectives that are usually limited to a single characteristic, such as U.S. large-cap stocks. Over time, however, the positions in the fund may drift from the initial objective.
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
Related content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Robert H. Yunich is a freelance writer in New York City. He has extensive knowledge about and expertise in investing and insurance. His career spanned over 30+ years in the financial services industry, including public accounting, banking, and as a financial adviser. He earned a Bachelor of Arts degree with a concentration in Economics from Columbia College (New York) and an MBA from Harvard Business School.
-
June CPI Signals Tariff Impact: What the Experts Say
The June CPI report shows that inflation is accelerating, but at a pace that's in line with economists' expectations.
-
I'm a Financial Planner: Here Are Five Smart Moves for DIY Investors
You'll go further as a DIY investor with a solid game plan. Here are five tips to help you put together a strategy you can rely on over the years to come.
-
Neglecting Car Maintenance Could Cost You More Than a Repair, Especially in the Summer
Worn, underinflated tires and other degraded car parts can fail in extreme heat, causing accidents. If your employer is ignoring needed repairs on company cars, there's something employees can do.
-
'Drivers License': A Wealth Strategist Helps Gen Z Hit the Road
From student loan debt to a changing job market, this generation has some potholes to navigate. But with those challenges come opportunities.
-
Stock Market Today: Markets Chop Up More Trump Threats
Stocks are grinding to new highs on light summer volume, and bitcoin is only getting bigger.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have Today
Procter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
Financial Pros Provide a Beginner's Guide to Building Wealth in 10 Years
Building wealth over 10 years requires understanding your current financial situation, budgeting effectively, eliminating high-interest debt and increasing both your income and financial literacy.
-
Five Mistakes to Avoid in Your First Year of Retirement
Retirement brings the freedom to choose how to spend your money and time. But choices made in the initial rush of excitement could create problems in the future.